Lenders relying less on Central Bank

Irish-based lenders’ reliance on central bank funding fell during August, according to the Central Bank.

The lenders’ ECB funding fell to €79.1bn at the end of August from €80.02bn a month earlier.

The Irish Central Bank’s “other claims on euro-area credit institutions in euro’’ fell to €40.8bn from €41.6bn a month earlier, according to the data.

This category is predominantly made up of so-called extraordinary liquidity assistance for banks, according to the Central Bank.

The Central Bank also released figures yesterday which show that the interest rate on total loans outstanding to households at the end of July was 0.12% lower than the previous month.

The average interest rate on mortgages with a maturity over five years was 2.86%, which was 0.47% lower than the end of Jul 2011 — reflecting the lower interest rate set by the ECB over the past year.

The average interest rate on new mortgages in Ireland was 3%. The average interest on consumer loans was 5.79%, while the average interest rate on short-term loans including credit cards and overdrafts was 8.95%.

However, the cost of deposits continues to rise for Irish banks. At the end of 2010, the average interest rate banks paid on household term deposits was 2.78%, compared with a eurozone average of 2.46%. By the end of July, Irish banks had to pay an average of 3.47%, while the eurozone average is 2.75%.

Irish banks have to pay a higher interest rate on deposits to secure funding, which is weighing on overall profitability.

— Additional reporting by Bloomberg